UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 33-15427
Retail Equity Partners Limited Partnership
(Exact name of Registrant as specified in its charter)
North Carolina 56-1590235
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3850 One First Union Center, Charlotte, NC 28202-6032
(Address of principal executive offices) (Zip Code)
704/944-0100
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No ___
Total number of pages: 10
1
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TABLE OF CONTENTS
Item No. Page No.
PART I - Financial Information
1 Financial Statements 3
2 Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II - Other Information
6 Exhibits and Reports on Form 8-K 9
2
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PART I - Financial Information
Item 1. Financial Statements.
RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Balance Sheets
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
------------------- ------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents $ 101,922 $ 76,863
Restricted cash - tenant security deposits 23,681 22,243
Accounts receivable, net 42,001 51,621
Prepaids and other assets 52,525 30,154
Deferred financing costs, net 4,997 9,800
Property held for sale 6,157,542 6,157,542
=================== ==================
Total assets $6,382,668 $6,348,223
=================== ==================
Liabilities and Partners' Deficit
Mortgage loans payable $6,796,006 $6,812,467
Trade accounts payable and accrued expenses 77,818 52,522
Prepaid rents and tenant security deposits 20,555 19,949
------------------- ------------------
Total liabilities 6,894,379 6,884,938
Partners' deficit:
Limited partners (443,850) (468,604)
General partner (67,861) (68,111)
------------------- ------------------
Total partners' deficit (511,711) (536,715)
=================== ==================
Total liabilities and partners' deficit $6,382,668 $6,348,223
=================== ==================
</TABLE>
3
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Statements of Operations
(Unaudited)
Three months ended
March 31
1998 1997
---------------- -----------------
Revenues
Rental revenue $257,331 $265,893
Interest and other income 1,431 1,800
---------------- -----------------
258,762 267,693
Expenses
Property operations 22,671 26,763
General and administrative 8,761 16,066
Property taxes and insurance 26,142 25,086
Management fees 13,969 14,094
Depreciation - 44,283
Amortization 4,803 4,803
Interest 157,412 158,861
---------------- -----------------
233,758 289,956
================ =================
Net income (loss) $ 25,004 $(22,263)
================ =================
Allocation of
net income (loss):
Limited partners (99%) $ 24,754 $(22,040)
================ =================
General partner (1%) $ 250 $ (223)
================ =================
Net income (loss) per
limited partnership unit $0.07 $(0.07)
================ =================
Weighted average number of
limited partnership units
outstanding 333,577 333,577
================ =================
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Statement of Changes in Partners' Deficit
(Unaudited)
Limited General
Partners Partner Total
-------------- ---------------- --------------
Balance at December 31, 1997 $(468,604) $(68,111) $(536,715)
Net income 24,754 250 25,004
============== ================ ==============
Balance at March 31, 1998 $(443,850) $(67,861) $(511,711)
============== ================ ==============
5
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31
1998 1997
---------------- -----------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 25,004 $(22,263)
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 4,803 49,086
Changes in operating assets and liabilities:
Rent and other receivables 9,620 5,754
Prepaid expenses and other assets (22,371) (22,025)
Accounts payable and accrued expenses 25,296 24,385
Security deposits and deferred revenue (832) (584)
---------------- -----------------
Net cash provided by operating activities 41,520 34,353
Investing activities - none
Financing activities:
Principal payments on notes payable (16,461) (15,011)
---------------- -----------------
Net increase in cash and cash equivalents 25,059 19,342
Cash and cash equivalents at
beginning of period 76,863 119,440
---------------- -----------------
Cash and cash equivalents at end of period $101,922 $138,782
================ =================
</TABLE>
6
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RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
Notes to Financial Statements - March 31, 1998
(Unaudited)
Note 1. Interim financial statements
Our independent accountants have not audited the accompanying financial
statements of Retail Equity Partners Limited Partnership (the "Partnership"),
except for the balance sheet at December 31, 1997. We derived the amounts in the
balance sheet at December 31, 1997, from the financial statements included in
our 1997 Annual Report on Form 10-K. We believe that all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of the financial
position and results of operations for the periods presented have been included.
We have condensed or omitted certain notes and other information from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
You should read these financial statements in conjunction with our 1997 Annual
Report on Form 10-K.
The results for the first three months of 1998 are not necessarily indicative of
future financial results.
Certain amounts in the 1997 comparative financial statements have been
reclassified to conform to the 1998 presentation.
Note 2. Recently Adopted Accounting Standards
We adopted Statement No. 130, Reporting Comprehensive Income, as of January 1,
1998. Statement No. 130 established requirements for reporting and displaying
comprehensive income and its components. Adoption of this Statement had no
impact on our net income or partners' deficit, or the presentation of our
financial statements.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion contains forward-looking statements within the
meaning of federal securities law. Such statements can be identified by the use
of forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. Although we believe that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, there are certain factors such as general economic
conditions, local real estate conditions, or weather conditions that might cause
a difference between actual results and those forward-looking statements. You
should read the following discussion in conjunction with the financial
statements and notes thereto included in this Quarterly Report and our Annual
Report on Form 10-K.
Partnership Profile
Retail Equity Partners Limited Partnership is a North Carolina limited
partnership formed in 1987 to acquire, hold, operate and manage three
neighborhood shopping centers. In February 1996, one of the three shopping
centers was sold to an unrelated party.
The Partnership received aggregate subscription funds of $6,671,543 for
333,577 beneficial assignment certificates ("BACs") from approximately 480
investors. There is currently no established public trading market for the BACs.
We are not aware of any secondary market for the Partnership's securities. There
is currently no established fair market value for the BACs.
Results of Operations
Revenues
Rental revenue for the first quarter of 1998 was $257,000, a decrease of
3.2% compared to the first quarter of 1997. During the first quarter of 1998,
Plaza West was 98% occupied, and Cape Henry Plaza was 97% occupied. During the
first quarter of 1997 both centers were 100% occupied.
Expenses
Total expenses for the first quarter of 1998 were $234,000, a decrease of
19.4% compared to the first quarter of 1997. The primary reason for this
decrease is that no depreciation was recorded in the first quarter of 1998,
compared to a $44,000 depreciation charge in the first quarter of 1997. In
January 1998 both Cape Henry Plaza and Plaza West were listed for sale. In
accordance with generally accepted accounting principles, no depreciation is
recorded on assets held for sale. Operating and administrative expenses were
generally in line with management's expectations.
Net income
Net income for the first quarter of 1998 was $25,000, compared to a loss
of $22,000 for the first quarter of 1997. Again, the increase in net income is
primarily due to the fact that no depreciation was charged in the first quarter
of 1998.
8
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Capital Resources and Liquidity
Cape Henry Plaza and Plaza West continue to generate nominal positive cash
flow from operations. The leases held by the Partnership are generally
long-term, with substantially all increases in operating expenses, taxes and
insurance passed through to, and paid by, tenants. In addition, most leases
include built-in rent increases based on changes in the consumer price index or
percentage rents based on total sales.
The Partnership currently generates sufficient cash flow to meet its
immediate operating and capital needs. However, any adverse development, such as
the loss of a major tenant, the loss of multiple smaller tenants, or the failure
of a significant tenant to pay rent, could create a material deficiency in the
Partnership's short-term liquidity. In addition, the Partnership may not
generate sufficient cash flow to make significant repairs, improvements or
modifications to the centers, if such needs arise.
In January 1998, both centers were listed for sale. The general partner
has entered into a contract for sale of Plaza West, subject to a vote by the
limited partners. Negotiations for the sale of Cape Henry Plaza are in final
stages, again subject to a vote by the limited partners.
The Partnership's two mortgage loans mature in August 1998. In the event
the Partnership's properties have not been sold prior to that date, the
Partnership will be required to refinance these loans. The general partner can
offer no assurance that, at that time, replacement financing will be obtainable.
Recently Issued Accounting Standards
In 1997 the Financial Accounting Standards Board issued Statement No. 131,
Disclosures About Segments of an Enterprise and Related Information. Statement
131 establishes standards for the way that public entities report information
about operating segments in annual financial statements and requires that those
entities report selected information about operating segments in interim
financial statements. We will be required to disclose segment information in
accordance with Statement 131 beginning in our 1998 annual report. We expect
that adoption of Statement 131 will not have a material impact on our financial
statements.
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 27 Financial data schedule (electronic filing)
b) Reports on Form 8-K: None
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RETAIL EQUITY PARTNERS
LIMITED PARTNERSHIP
(Registrant)
By: Boddie Investment Company
General Partner
May 14, 1998 /s/ Philip S. Payne
------------------------
Philip S. Payne
(Duly authorized officer)
10
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RETAIL EQUITY
PARTNERS LIMITED PARTNERSHIP FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 101,922
<SECURITIES> 0
<RECEIVABLES> 42,001
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 220,129
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,382,668
<CURRENT-LIABILITIES> 98,373
<BONDS> 6,796,006
0
0
<COMMON> 0
<OTHER-SE> (511,711)
<TOTAL-LIABILITY-AND-EQUITY> 6,382,668
<SALES> 0
<TOTAL-REVENUES> 258,762
<CGS> 0
<TOTAL-COSTS> 62,782
<OTHER-EXPENSES> 13,564
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,412
<INCOME-PRETAX> 25,004
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,004
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0
</TABLE>
